Eskom’s black hole of debt is a threat to all

Letters / 14 July 2014, 08:00am

We now regularly read of Eskom having a shortfall of something over R200 billion, with the government scratching its collective head as to where this possibly came from or, worse still, how they could ever fill this hole.

Oddly enough, the shortfall roughly equates to the cost of building the Medupi and Kusile power stations, which should have been financed under a bond issue or some similar financial arrangement.

But, according to recent pronouncements of the ratings agencies, Eskom’s creditworthiness has been reduced to much the same as that of the country and international financing is now expensive. So the taxpayer must pay, probably at the expense of the budgets for health and education because, without electricity, hospitals and schools are ineffective.

More importantly, how did Eskom create this crater of debt, apart from the cost of building new capacity?

The answer would appear to lie in its own technical incompetence and inability to maintain and operate the country’s power stations. With unplanned outages (generally boiler and generator failures) running at a regular 15 percent of total capacity, this equates to a loss of unsold power worth, to Eskom, some R150bn since load-shedding began six years ago. This is without taking into account similar losses incurred during the years up till then. And there can be no argument that the power would have been sold as there is no shortage of demand.

The mantra of any reasonable business is that, once you have bought capital equipment, you simply must make it work for you, if only to repay the financial investment and forgetting about profit. Painfully regular unplanned outages, as experienced by Eskom, are simply unacceptable in any business.

We also regularly read of Eskom complaining of the age of its power stations. In fact, they are generally newer than much of the world’s base-load power generating capacity, with the exception of China. But, if they are so old that they must be replaced, how would Eskom intend replacing them?

At the capital costs established (by Eskom) for the new power stations, the replacement cost alone (without power reticulation and coal mine establishment) would be well in excess of R1 trillion, exceeding the country’s total annual budget, funding far beyond Eskom’s wildest dreams.

The engineer suggests that this is all unnecessary if Eskom accepted the old adage of “only a poor workman blames his tools” and got on with its remit of employing the right people to do the job and managing that team efficiently. That might stop Eskom’s almost systematic degradation of the massive investment with which it is entrusted.

Thankfully, the platinum miners’ strike is over, but that must be striking terror into Eskom’s so-called management as the return of activity on the mines will throw approximately 400 megawatts more load on to the wobbling grid.

It is high time the country called an end to the illegitimate supply of electricity to the BHP Billiton aluminium smelters and returned some 1 500MW to the rightful owners of that power. But that murky deal was given to the National Energy Regulator of SA (Nersa) to resolve months ago and, Nersa being what it is, we can’t expect any resolution this side of hell freezing over.